Hungary extends retail mortgage interest rate cap until mid-2025

Hungary's government will extend an interest rate cap on retail mortgages by another six months, until the middle of 2025, Prime Minister Viktor Orban's chief of staff said on Thursday.

The Hungarian government froze retail mortgage rates starting on Jan. 1, 2022 to shield households from rising inflation, which scaled the European Union's highest levels at 25% in January 2023.

Hungary's headline inflation was 3.2% year-on-year in October this year.

"This is a measure that has been with us for a long time, ... if we did not do this, families would have had to pay hundreds of billions of forints. This way the banking sector is taking on these costs," Gergely Gulyas told a press briefing.

"We think that in the current interest rate environment the cancellation of this measure is not yet justified," he said.

Economy Minister Marton Nagy told a conference in April that phasing out the rate cap would negatively affect a recovery in consumption, adding that the interest rate cap needed to be phased out eventually.

In power since 2010, Orban has struggled to revive Hungary's economy from last year's downturn.

In the third quarter of this year Hungary's economy contracted by 0.7% from the previous three months, weighed down by weakness in farming, industry and construction, and dragging the economy into a technical recession.